Question

P 2–6Accounting cycle

The general ledger of the Karlin Company, a consulting company, at January 1, 2021, contained the following account balances:   Account Title Debits Credits Cash 30,000 Accounts receivable 15,000   Equipment 20,000   Accumulated depreciation 6,000 Salaries payable 9,000 Common stock 40,500 Retained earnings       9,500Total 65,000 65,000
The following is a summary of the transactions for the year:

1. Service revenue, $100,000, of which $30,000 was on account and the balance was received in cash.
2. Collected on accounts receivable, $27,300.
3. Issued shares of common stock in exchange for $10,000 in cash.
4. Paid salaries, $50,000 (of which $9,000 was for salaries payable at the end of the prior year).
5. Paid miscellaneous expense for various items, $24,000.
6. Purchased equipment for $15,000 in cash.
7. Paid $2,500 in cash dividends to shareholders.

Required:

1. Set up the necessary T-accounts and enter the beginning balances from the trial balance.
2. Prepare a general journal entry for each of the summary transactions listed above.page
3. Post the journal entries to the accounts.
4. Prepare an unadjusted trial balance.
5. Prepare and post adjusting journal entries.
6. Accrued salaries at year-end amounted to $1,000.
7. Depreciation for the year on the equipment is $2,000.
8. Prepare an adjusted trial balance.
9. Prepare an income statement for 2021,a retained earnings statement, and a balance sheet as of December 31, 2021.
10. Prepare and post-closing entries.
11. Prepare a post-closing trial balance.

Answer 1

2, 5 & 8. General jounal, Post Adjusting journal & Post-closing entries

Date	General Journal	Debit	Credit
a	Account Receivable	30,000
	Cash	70,000
	Service Recenue		100,000
b	Cash	27,300
	Account Receivable		27,300
c	Cash	10,000
	Common stock		10,000
d	Salaries payable	9,000
	Salaries expense	41,000
	Cash		50,000
e	Miscellaneous expenses	24,000
	Cash		24,000
f	Equipment	15,000
	Cash		15,000
g	Dividends	2,500
	Cash		2,500
	Adjusting Entries
1	Salaries expense	1,000
	Salaries payable		1,000
2	Depreciation expense	2,000
	Accumulated depreciation		2,000
	Closing Entries
3	Service Recenue	100,000
	Income summary		100,000
4	Income summary	68,000
	Salaries expense		42,000
	Depreciation expense		2,000
	Miscellaneous expenses		24,000
5	Income summary	32,000
	Retained Earnings		32,000
6	Retained Earnings	2,500
	Dividends		2,500

1 & 3. T-Accounts and Posting jounal entries

Cash
Date	Debit	Date	Credit
Opening Balance	30,000	d	50,000
a	70,000	e	24,000
b	27,300	f	15,000
c	10,000	g	2,500
Ending balance	45,800

Account Receivable
Date	Debit	Date	Credit
Opening Balance	15,000	b	27,300
a	30,000
Ending balance	17,700

Equipment
Date	Debit	Date	Credit
Opening Balance	20,000
f	15,000
Ending balance	35,000

Accumulated depreciation
Date	Debit	Date	Credit
		Opening Balance	6,000
		2	2,000
		Ending balance	8,000

Salaries payable
Date	Debit	Date	Credit
d	9,000	Opening Balance	9,000
		1	1,000
		Ending balance	1,000

Common stock
Date	Debit	Date	Credit
		Opening Balance	40,500
		c	10,000
		Ending balance	50,500

Retained Earnings
Date	Debit	Date	Credit
		Opening Balance	9,500
6	2,500	5	32,000
		Ending balance	39,000

Dividends
Date	Debit	Date	Credit
g	2,500	6	2,500

Service revenue
Date	Debit	Date	Credit
3	100,000	a	100,000

Salaries expense
Date	Debit	Date	Credit
d	41,000	4	42,000
1	1,000

Miscellaneous expenses
Date	Debit	Date	Credit
e	2,500	4	2,500

Depreciation expense
Date	Debit	Date	Credit
2	2,000	4	2,500

Income summary
Date	Debit	Date	Credit
4	68,000	3	100,000
5	32,000

4, 6 & 9. Un-Adjusted, Adjusted & Post-closing trial balance

KERLIN COMPANY
Trial Balance
For the year ended December 31, 2021
	Unadjusted	Adjusted	Post-closing
Account Names	Debit	Credit	Debit	Credit	Debit	Credit
Cash	45,800		45,800		45,800
Account receivable	17,700		17,700		17,700
Equipment	35,000		35,000		35,000
Accumulated Depreciation		6,000		8,000		8,000
Salaries payable				1,000		1,000
Common stock		50,500		50,500		50,500
Retained earnings		9,500		9,500		39,000
Dividends	2,500		2,500
Service revenue		100,000		100,000
Salaries expense	41,000		42,000
Miscellaneous expense	24,000		24,000
Depreciation expense			2,000
Total	,166,000	166,000	169,000	169,000	98,500	98,500

7. Income statement and Balance sheet

KERLIN COMPANY
Income statement
For the year ended December 31, 2021
Service Revenue		100,000
Operaing Expenses:
Salaries expense	42,000
Miscellaneous expense	24,000
Depreciation expense	2,000
Total Operaing Expenses		68,000
Net Income		32,000

KERLIN COMPANY
Income statement
For the year ended December 31, 2021
Assets
Current Assets
Cash	4,500
Accounts receivable	17,700
Total Current Assets		63,500
Fixed Assets
Equipment	35,000
Accumulated Depreciation	(8,000)
Total Fixed Assets		27,000
Total Assets		90,500
Liabilities and Stockholders Equity
Current Liabilities
Salaries payable	1,000
Total Current Liabilities		1,000
Stockholders Equity
Common stock	50,500
Retained Earnings	39,000
Total Stockholders Equity		89,500
Total Liabilities and Stockholders Equity		90,500